Calculate: Tax Reduction Amount for a Donation

Allison is the sole shareholder of Destiny Corporation, which operates a travel agency for business travelers. Allison would like the corporation to donate some used computers to a local private school dedicated to the education of young ladies. The private school is a tax-exempt organization that qualifies donors for the charitable deduction. The corporation purchased the computers two years ago for a total cost of $90,000, and for tax purposes expensed this entire amount in the year of the purchase under the first-year expensing rule of Section 179 of the Internal Revenue Code. Currently the fair market value of the computers is $40,000. Allison has asked you to determine what the corporation's tax deduction will be for this donation. The corporation's taxable income is sufficient for it deduct up to $50,000 in charitable contributions. Using internet sources, find the answer to her question.

Solution Preview

If the corporation's taxable income is sufficient for it to deduct up to $50,000 in charitable contributions, Allison would be able to use $40,000 as the charitable deduction. The amount used is always the fair ...

Solution Summary

This solution shows the proper calculation to determine the corporation's tax deduction for a donation. The applicable IRS tax code is also cited in this solution.